Create a options dynamically based on selection in content type

I am trying to create new fields in a content type that based on a selection by a user another menu gets displayed with options based on that selection earlier. Each parent selection could potentially have different child options. Is there a way to do this with the out-of-the-box solution or do I need to install some custom files?

Sounds like you need to implement a custom control. See the Technical Reference Manual, “Writing Custom Controls.”

Can I not use the PSO drop down kit?